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Bosnia-Herzegovina Country Risk Report Q4 2018

Bosnia-Herzegovina Country Risk Report Q4 2018

Political risks are rising in the run-up to the October 7 general election, with major parties hardening their rhetoric to aggravate ethno-nationlist concerns and entrench existing divisions within society.

Failure to reform the electoral law means there is a growing threat of a crisis in forming a government after October's vote, a scenario that would effectively paralyse the policymaking process.

The recent unlocking of IMF and other international credit lines should support badly-needed investment in infrastructure and provide a moderate boost to economic growth over the coming two years.

Long-term economic development will continue to be restricted by the country's dysfunctional political system and unstable business environment.Major Forecast Changes

We have lowered our forecast for GDP growth in 2019 to 3.3%, from a previous 3.5%, due to heightened political uncertainty and a weaker external backdrop amid rising risks to global trade.

Key Risks



Deep-rooted political divisions, a rise in ethnic tensions, and weak institutions leave Bosnia vulnerable to external meddling in the forthcoming elections, which would further damage the country's democratic foundations.

A sharp rise in migrant arrivals in 2018 is exposing the limitations of the country's complex political system, while also fuelling political and social tensions.

An escalation of the US-EU trade dispute could damage the export potential of Bosnia's steel industry, which is a key contributor to trade, jobs and output.

A failure to enact reforms or unilateral pre-election spending hikes could lead to another suspension of the EUR550mn agreement with the IMF, creating financ-ing problems for both entity governments and steering money away from growth-inducing capital spending.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Healthy Growth Outlook For Bosnia, But Risks Rising
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP FIVE GOODS EXPORTS IN 2017
TABLE: TOP FIVE GOODS IMPORTS IN 2017
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
10-Year Forecast
The Bosnian Economy To 2027
Politics The Main Hurdle To Long-Term Economic Convergence
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Bosnia & Herzegovina Country Risk Q4 2018ContentsPolitical Outlook
Domestic Politics
Risks Mount In Bosnia As Election Draws Nearer
Long-Term Political Outlook
EU Accession Still A Distant Prospect
Global Macro Outlook
Fewer Negative Surprises, But Trade Risks Rising
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: BOSNIA-HERZEGOVINA – MACROECONOMIC DATA AND FORECASTS

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